Ocean Freight Rates Hit All-Time Lows

Written by Kelvin Heppner on Thursday, 27 December 2012

Canadian grain exporters are benefiting from all-time low ocean freight rates.  The Baltic Freight Index, an indicator of ocean shipping prices, hit an all-time low last week.

"The freight rates peaked about five-six years ago and, ever since, they've been coming down.  It's just a matter of over-supply of vessels versus the freight that needs to be put on the vessels," says Bruce Burnett of CWB.

As an example, the price of shipping from the West Coast to Japan is around $20 per tonne.

"That's extremely low relative to not only the peaks of five, six years ago but even a historical average rate," he says.

Burnett says it's unlikely that shipping rates will increase significantly in the near future.

"We're probably hitting a bottom, but with the supply of vessels out there right now, you're probably not going to see an uptick from these lower levels for quite some time," he says.

The low freight rates allow exporters like CWB to compete in markets that are out of reach with higher shipping rates.

"We can go to markets that weren't competitive under the high freight rate regime now, so generally speaking it's good news for our export demand."